Ontario Budget Report

Will Ontario have a balanced budget by election year 2007? Greg Sorbara said no yesterday in his budget.

Ian Urquhart at the Liberal Party's house organ, however, is cackling with glee about Sorbara's cunning plan to produce one just in time for the next Ontario election:

In fact, the government is on track to deliver a balanced budget in 2007, which just happens to be an election year. The small print in the budget tells us so.

First of all, the deficit forecast for the 2007-08 fiscal year — $1.5 billion — is offset in the government's projection by a "reserve" fund of the same amount.

This is prudent budgeting. A government never knows when unforeseen events — like the SARS outbreak in 2003 — might throw its projections off track and require the use of reserve funds. But absent such an event, the government could book the reserve and claim a deficit of zero in 2007-08.

Indeed, the government did just that in the past fiscal year to help bring the deficit down from a projected $6.1 billon to $3 billion.

Secondly, the government traditionally underestimates its revenues. Last year, for example, revenues were $2.65 billion higher than forecast. A similar windfall in 2007-08 would wipe out the deficit for that year.

Thirdly, the outlook for 2007-08 contained in yesterday's budget does not include new federal transfers that were promised in last weekend's deal between Premier Dalton McGuinty and Prime Minister Paul Martin. Provincial officials were reluctant to estimate how much money is involved, but it could be in the range of $1 billion by 2007-08.

And finally, yesterday's long-term budget outlook makes no provision for new revenues from the sale of government assets, even though Sorbara said in his budget speech that "a review of major government assets continues."

The previous Conservative government used asset sales to balance the budget before each of the last two elections. What assets might the Liberals sell? The LCBO, for one. An expert panel is currently examining the government-owned booze retailer with an eye to selling it or turning it into an income trust.

So the elements are in place for Sorbara to pull a balanced budget out of his hat two years from now — or within six months of the 2007 election, thereby depriving the opposition Conservatives of an effective attack against the governing Liberals.

But look what else he's promised:

$6.2 billion over five years for post-secondary students.

$30 billion for infrastructure.

$33 billion for health care and NO NEW TAXES (so far).

All this and a balanced budget in two years time, assuming that economic growth continues to rise, they can sell the LCBO, the recent deal with Paul Martin holds up, etc. etc.

Wishful thinking, all of it. But who'll remember this promise two years from now?